Government delivers boring, safe pre-election budget
The government will introduce a new youth job readiness programme (called “PaTH”), cut company taxes, and make changes to Australia’s superannuation (retirement) scheme too complicated to explain. Also, Jobs and Growth looks like it will be the slogan of the budget.
These measures were contained in the federal government’s 2016/17 budget, which was announced today by Treasurer Scott Morrison, and what we just printed are the parts he’s most keen for you to hear about.
However, the budget also has no new information on higher education, no direct cuts to personal income tax (although it has a ‘widening’ of the middle income tax bracket) and relies on perhaps optimistic assumptions to make the numbers add up.
We have full coverage on the government’s higher education ‘non-announcement’.
With the budget coming just before an election (tipped to be called for the 2nd July), it is fairly restrained as budgets go: no big new spending announcements, a slough of positive words about jobs, growth, innovation, health and education, and no really painful cuts. Despite Morrison selling the budget as an “economic plan [and] not just another budget”, our assessment is that it is just another budget, albeit one with an election in mind.
Below, we’ve summarised some of the key information about the budget that’s relevant to you.
- Higher education has had no substantial announcements — instead, the government is running a “consultation process” over the election period
- Youth Jobs PaTH—Prepare, Trial, Hire—is a new jobs pathway programme
- Superannuation changes occupied a lot of airtime in the Treasurer’s speech
- Melbourne Metro has received no direct funding
- The Higher Education Participation Programme, or HEPP, is being cut further. HEPP aims at improving accessibility of higher education to students from disadvantaged background, and the reduced funding will presumably directly reduce grants made to universities.
- Company tax will be going down from 30% to 25% over the next ten years, starting with small businesses first
- Tax brackets get a tiny adjustment, with the threshold between 32.5% and 37% tax moving to $87,000
- Defence spending is where the government is staking a lot of its ‘innovation’ talk, with much-reported warship purchases said to create high-tech jobs
Higher education
See our full coverage.
Youth Jobs PaTH
One of Morrison’s headline announcements is Youth Jobs PaTH: a “ambitious new attempt to get vulnerable young people into jobs”. The programme comes into effect in 2017.
It’s not quite Frank Underwood’s House of Cards America Works programme, but it involves three stages:
- Pre-employment training, to “develop basic employability skills”
- Twelve week trial internships, with incentive payments for both the intern and the business
- Wage subsidies
There are not many details at this point, and it sounds like the sort of programme that could easily be an effective and innovative approach to a serious problem — but it could also be an inefficient government bureaucracy, surrounded by predatory private providers of “job training skills”, or unscrupulous businesses taking advantage of interns.
It also remains to be seen how the internship programme, which is explicitly a trial with no guarantee of a permanent position, will interact with Australia’s Fair Work scheme, and how businesses will be prevented from using interns as government-subsidised labour.
Superannuation changes
There are a few changes to superannuation (Australia’s tax-advantaged retirement scheme).
The Low Income Superannuation Tax Offset (LISTO) will offset tax paid on compulsory superannuation contributions: at the moment, low income earners pay more tax (15%) on compulsory superannuation contributions than on their personal income—defeating the point of tax-advantaged scheme.
If you’re a student currently receiving superannuation contributions, this measure should make a small but noticeable difference in your super balance in retirement. However, students not working, or earning under the $450/fortnight threshold for compulsory superannuation, will see no benefit from the LISTO.
How the LISTO interacts with the existing Low Income Super Contribution (LISC) (as distinct from the Government Co-Contribution) is not clear.
There are a raft of changes to superannuation, too—we’ve just picked the one we think will have the broadest impact.
Melbourne Metro
Despite calls by the Victorian government for Commonwealth funding for the Melbourne Metro underground rail project, there are no direct announcements in the budget concerning it (although it did get a brief cameo in the Treasurer’s speech). As previously announced, the $1.5bln allocated to fund the ill-fated East-West Link has been allocated to other Victorian road infrastructure projects.
However, the government did indicate its willingness to include Melbourne Metro as part of its “asset recycling” initiative — a programme whereby the federal government pays state governments to privatise their assets, in order to spend that money on building new infrastructure (e.g., the Melbourne Metro)—presumably then to privatise that new infrastructure.
In its Victorian state budget last week, the Victorian government committed to fully funding Melbourne Metro from its own resources.